How to spot a risky peer to peer platform

Start with the regulation

The baseline check: is the platform authorised and regulated by the FCA to operate a P2P lending platform, and does it hold ISA manager status from HMRC if it offers an IFISA? You can confirm authorisation on the FCA Register. Be wary of vague claims like "FCA registered" that don't match the permissions you'd expect.

Look hard at the rate

A target rate well above the rest of the market is not a bargain, it is a risk signal. Higher advertised returns almost always mean a higher chance of losing money. If a platform is paying noticeably more than established names, ask what extra risk you are being paid to take.

Questions worth answering before you invest

• What is the security? Are loans backed by an asset such as property with a legal charge, and at what loan-to-value? Unsecured lending carries more risk.
• How transparent is the loan book? Good platforms publish their lending history, arrears and default rates. Opacity is a red flag.
• What is the track record? How long have they operated, and crucially, have they lent through a downturn rather than only good times?
• What does the provision fund actually cover? If there is one, treat it as discretionary, not insurance, and check whether it could be exhausted.
• What is the wind-down plan? See our guide on what happens if a platform goes bust. A platform that can't explain this clearly is a concern.
• How would you exit? Is there a secondary market, and does it actually function, or could your money be locked in?

Marketing red flags

Be cautious of pressure tactics, time-limited "bonuses" that rush a decision, headline rates that bury the risk warning, and anything that downplays the fact that capital is at risk. A trustworthy platform leads with the risks, not away from them.

Turn it into a habit

Run the same checks on every platform, including the ones in our comparison. To make it easier, we've built an interactive platform risk checklist you can work through before committing. Doing the homework is not optional with money you could lose.